LegalZoom business model OK'd by South Carolina Supreme Court

Updated: LegalZoom, the purveyor of online interactive self-help legal documents, announced in a press release this week that the South Carolina Supreme Court has approved the company’s business practices, which have been challenged in a number of state courts as unauthorized practice of law.

According to a report (PDF) by the state supreme court’s referee handling the case, LegalZoom was offering interactive self-help documents that were like ones already offered by various state and local agencies. Though the company basically was found to be operating properly under South Carolina law, it agreed to pay the plaintiff’s lawyers $500,000 in settling the matter.

On March 11, the high court signed off on the report and recommendations by Judge Clifton Newman, an at-large judge for the state’s circuit courts. Newman was tapped as a special referee for the lawsuit brought against LegalZoom in 2012 by T. Travis Medlock, a former state senator and attorney general. The supreme court accepted the case in its original jurisdiction.

LegalZoom operates in all 50 states and has faced similar challenges elsewhere. Currently it is fighting another challenge in North Carolina.

The underlying report and recommendations for the agreement and order noted that, according to an affidavit by one South Carolina attorney, of 20 practice areas encompassed by LegalZoom’s document service, for 19 of them the same basic services “are available online to South Carolina citizens (and the public at large) via other self-help portals at websites maintained by various South Carolina governmental agencies.”

Only the document service’s Pet Protection Agreement is not.

The report determined that LegalZoom’s self-help documents do not provide legal advice, and the company does not provide legal assistance to its customers in creating the document, and thus do not engage in the unauthorized practice of law.

“LegalZoom’s software acts at the specific instruction of the customer and records the customer’s original information verbatim, exactly as it is provided by the customer,” Newman wrote in the report, adding that its “does not exercise any judgment or discretion, but operates automatically in the same fashion as a ‘mail merge’ program.”

Kenneth Friedman, LegalZoom’s vice president of Legal and Governmental Affairs, said in a prepared statement: “When sophisticated legal minds consider issues of access to justice, they look at it mindful that UPL regulations must be about protecting the public, not protecting lawyers. The Supreme Court of South Carolina understood this, and it is really the direction the legal consensus is moving.“

Updated on April 28 to remove outdated information about challenges LegalZoom faces in other states.